EXECUTIVE SUMMARY

EXECUTIVE SUMMARY

The consumerisation of urban India

India is one of the world’s youngest nations with nearly two-third of its population
under the age of 35 years and a median age of 24 years. Urban India accounts for
nearly 30% of this burgeoning young population. The young urban Indian consumer,
aged between 21 and 40 years, has grown up in the post-liberalisation era with the
tailwind of a booming economy and without any guilt of consumption. We believe
there is a significant shift taking place in the consumption pattern of these young
urban liberalised Indian consumers or Yulics, led by various demographic,
psychological, and economic factors.

Rising aspiration levels, spending power - changing the consumption behaviour
of Yulics
Increase in the number of middle- and upper-income households has expanded the
reference group for consumption, creating a strong pull factor to consume certain
products and services. Growing penetration of television, internet, and foreign travel
has made information about the latest styles/fashion easily accessible. This has raised
the aspiration levels of Yulics, who are no longer afraid to use credit to fulfil their
needs. In our view, we will see a leap in the spending on certain consumption categories
as aspiration levels rise further.
Strong economic growth after liberalisation and increasing globalisation has resulted
in higher household incomes, and these continue to rise with the Indian economy
growing at a brisk pace. Easy availability of credit and the rise of sunrise sectors like
BPO and retailing are further channelling more money into the hands of Yulics. This
is increasing their ability to pay for their changing needs.

Emergence of the Lifestyle space
Percentage of consumption expenditure on traditional items like food, groceries and
footwear is already shrinking. The Yulics are not satisfied by purely spending on
basic products and services; they want to indulge by consuming goods and services
that satisfy their lifestyle needs, which can broadly be classified as leisure, convenience
& comfort, wellness and aspirational needs. We believe products and services that
satisfy these needs will show significant increases going forward. We combine all
these under a single umbrella reflecting the homogeneity of their demand and term
them as lifestyle goods and services. We estimate the current size of the Lifestyle
sector at ~INR 828 bn and expect that this will more than triple by 2010 to
INR 2,594 bn.

Our top picks
Within the lifestyle sector, certain categories will grow exponentially because of changing
consumption behaviour as well as availability; others will show above average growth
as income levels rise and people move to a more aspirational product. In this report, we
focus on select lifestyle categories. While a few are almost entirely driven by the trend
towards lifestyle consumption, many others are embedded in existing sectors. Some
are still nascent but are likely to emerge as significant sectors going forward.
We cover organized retailing, air travel, alcoholic beverages, hotels, media &
entertainment and a few other embedded lifestyle categories. Our top picks are
companies across sectors which will benefit the most from the trend towards lifestyle
consumption – Trent, Shringar Cinema, Asian Hotels, TV18, Dabur, Marico
and Jet Airways.

Edelweiss 2